Economists: Yellen likely to succeed Bernanke

Jul. 28, 2013
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Lawrence Summers / Susan Walsh, AP

by Paul Davidson, USA TODAY

by Paul Davidson, USA TODAY

President Obama will pick the first woman to head the Federal Reserve - one of the world's most powerful jobs -- over a veteran Washington insider, economists surveyed by USA TODAY predict.

Thirty-two economists said they expect Fed Vice Chairwoman Janet Yellen to succeed Chairman Ben Bernanke next year. Four predicted Obama will nominate Larry Summers, his former economic adviser and President Clinton's Treasury secretary.

The survey was done last week amid a flurry of media reports suggesting that the field was narrowing to a choice between Yellen and Summers or that Summers was the front-runner.

The White House has said only that a decision will be made in the fall. In an interview with The New York Times published over the weekend, Obama said he has narrowed his choice to "some extraordinary candidates." Treasury Secretary Jack Lew declined to express a preference in an interview on ABC's This Week on Sunday.

Yellen is "extremely well-qualified and she's been there through the (financial) crisis," says Diane Swonk, chief economist of Mesirow Financial. "We need continuity."

Vincent Reinhart, chief U.S. economist of Morgan Stanley and former head of monetary affairs at the Fed, thinks Obama will pick Summers.

"The president really has tended to reward loyalty," Reinhart says, "and Summers has that history with the president that Yellen doesn't."

The presumptive horse race between Yellen and Summers to be the nation's top economist has transfixed Washington in a uneventful political summer even though the White House says a nominee won't be announced until fall.

After reports last week that Summers may be emerging as the favorite, Senate Democrats began a petition in support of Yellen and House Democratic leader Nancy Pelosi endorsed her in a Bloomberg Television interview. "It would be great to have a woman," Pelosi said.

Bernanke hasn't said whether he plans to step down when his second four-year term ends in January, but his departure is widely expected.

The Fed chairman is the most influential voice on a policymaking committee that can speed up or slow down U.S. economic growth by lowering or raising interest rates, among other moves that ripple across the global economy.

Yellen, 66, chaired the Council of Economic Advisors under Clinton and headed the San Francisco Federal Reserve Bank for six years before becoming vice chairwoman of the Fed's board of governors in 2010.

Obama likely would relish the opportunity to nominate the first female Fed chief, says Nariman Behravesh, chief economist of IHS.

Like Bernanke, Yellen has used a collegial style to push through bold programs by building consensus on the Fed's politically diverse Federal Open Market Committee.

"She convinces people through the strength of her argument but she's not argumentative," says Swonk, with Mesirow Financial.

Summers, 58, is widely regarded as brilliant but sometimes arrogant. "Summers doesn't play nicely with others," Swonk says. "Congress doesn't like him." As Treasury secretary, she says, he took part in the 1990s banking industry deregulation that led to the 2008 financial crisis.

Reinhart says criticism of Summers as domineering is overstated, noting he held senior positions in two administrations that required him to work with colleagues.

As Obama's chief economic adviser in his first term, Summers was a key architect of the policies that helped pull the nation from recession and he is viewed as having a steady hand in a crisis.

Most telling, Reinhart says, is that the White House apparently is floating Summers' name. "But we haven't heard anything that can really be construed as a trial balloon about Yellen," he says.